fatbrit

Great info, thanks!

Summary seems to be that the UK government has no problem with you transferring your pension to the US, but the US government will tax you to death with the transfer. So it's a non starter.

Ray Wright

My general impression is neither side makes it easy. The UK pension companies appear to try to bury you in red tape and complicated forms hoping that you will leave the money in their fund. The UK Government pension department seems to have the processes in place (QROPS) but they do not seem to work very well. If you get past that stage, you then hit planet America, and my experience so far is the actual US pension companies are clueless as to how to go about UK to US transfers. As for the facts behind the taxation situation, that is my next step. I have tried to get some information from the IRS, but after encountering their robotic telephone systems, I ended up screaming down the phone “Can I speak to a human being please” and gave up. I now have a meeting arranged with a pension’s specialist CPA (US Accountant) to hopefully discover the real IRS laws associated with transferring Pension Fund cash directly into a US pension fund. I will update this section as I discover more of the facts.

nun

The IRS does not recognize UK pensions and qualified for transfer or rollover. It may be ok on the UK end, but its not ok as far as the IRS is concerned. Pensions are for retirement so leav it alone and transfer the income when it matures.

dunroving

As this comes up on a regular basis, if anyone ever does get to the bottom of it all, it might be worth posting it as permanent information .... of course, I've got no idea where we put that kind of stuff on here, except the post-its at the top ...

Yassir Arthur

This thread is very interesting - I'm looking for information myself in order to eventually divide my retirement between both countries.

I understand that you can receive both Soc Sec and the UK Pension, if you have paid-up into both and can collect them in either country. Of course, assuming that they both still exist.

Say you split your time, 6 months here and 6 months there; I wonder what the tax situation would likely be in the US as a result of this?

Also, does anyone know what the residency rule might be? Basically, you'd have a "primary residence" in both countries. Wouldn't you?

Thanks for any ideas.

nun

You can receive income from pensions where ever you are. Moving a tax deferred retirement account from from the UK to the US is basically a "NO NO".

The US and UK have a social security agreement so that contributions in one country can count to the other's scheme and if you have enough credits in both countries you'll get a pension from both, however, it may be at a slightly reduced rate. The state pension is only taxable in your country of residence.

Cross border taxation is a complicated area and when you add private pension income on top of that it just gets worse.

Bob

the wiki is a good spot for it, not that anyone bothers to check it out, nor maintain it or so it seems

Yassir Arthur

Thanks, I got most of that stuff about the reciprocal agreement as I started looking into that a while back and am presently playing catch-up with UK pension payments.

Its the residency angle which would be nice to know.

Thanks.

stefanyoungs

You can establish your precise rights to UK pensions by writing to

HM Revenue and Customs
Charity Assets and Residence BP1301
Benton Park View
Newcastle on Tyne NE98 1ZZ
Tel +44 191 22 53312

www.hmrc.gov.uk

Give them your NHI number and they will send you a letter telling you what your pension will be based on how much you've paid in, and how you can make payments to bring it to the full value.

There's a book on the subject produced by the old DHSS in 1998 called Social Security Abroad (leaflet NI38). Doubtless there's a later verison

Bob

That isn't the problem...the problem is trying not to get hammered with tax trying to bring it to the US...

NC Penguin

It would go in the Wiki.

nun

I think we have to be careful not to confuse state pensions with private pensions here. State pensions are easy to deal with and a call to the UK pensions service or US SS will let you know how much you'll get at retirement.
Taxation of that money is also pretty straight forward.

The issue comes with private pensions. Again its not possible to transfer these from the UK to the US. Once you take income from them how you are taxed will depend on your citizenship and domicile and whether you have pre-paid tax on your contributions. eg if you are a US citizen paying into a UK pension plan its best to pay the tax on the UK tax deferred contributions to the IRS and use your foreign tax credits to offset it so you pay 0% tax in the US. Then when you take income form the pension its US tax free.

im9907620

- Further to earlier posts, it is not possible to trasnfer from the UK to the US using a QROPS scheme. Although, there are US firms with schemes listed as acceptable this is not the case, unless you have been lucky or subsequently been tax at penal rates following transfer.
Whilst, it is possible that an acceptable QROPS may appear, anything at right now is merely in the preliminary stage.
- With the recent changes in UK pensions, it is now possible to take your lump sum without buying an annuity and moving your remanining fund into 'drawdown' (but only for larger funds typically because of cost/risk).
- Under the US/UK double tax treaty a lump sum will not be taxed in the UK but will be subject to your marginal tax rate in the US (so maybe invest in the UK in a dollar denominated fund).
- Should you transfer your pension or not. There is no right or wrong answer, but the following should be considered:
* is your UK personal pension fund doing well against it peer funds/what is its risk? do you even know?
* are you comfortable that your deferred occupational pension rises typically by the lesser of 3 or 5% p.a. or the UK RPI (usually the latter!) - a pension money market fund would probably return more if you transferred.
* are you within 5 years of retirement? if so, you should not perhaps transfer away from an occupational scheme for security. The exception here (presently) might be that transferring would enable you to convert 50% or 100% to a dollar fund, especially if you plan to stay in the US for the forseeable. If a personal fund, then consider transferring 20% per year into the pension provider's cash or deposit fund over 5 years for added security.
* if you transfer, do you want flexiblity of income, or an input in the fund's investment management?
- There has been a few references to charges on pensions. There is usually no penalty for transferring away other than those funds in 'with-profit' funds - a check first is sensible. For occupational schemes taken early you would normally see a reduction in the actual annuity. There are annual admin charges on most pension contracts - nothing new there! - and then there is an adviser's charge which could range from co-ordinating the whole lot, to advising you on investment strategy.

There is normally an entry charge from the new provider which ultimately pays the adviser unless you are paying fees (perhaps a more sensible option as then entry can be nil/negligible). Even if you are not paying fees, the typical entry charge of 2-3% can be reduced if your adviser is looking after it and you on a regular basis.

Do bear in mind though, that any professional who specialises will charge for their time and pension transfers are notoriously complicated and slow in the UK, and many transfers will require a list of pros and cons before you act. A professional's time and trouble may well be cheap if you make the wrong decision yourself or leave your fund unattended in the wrong place.

Hope this helps.

Ray Wright

Thank you for the information. Ultimately this is the conclusion I have come to, after talking to some of the international pension companies, and even after dealing directly with the QROPS specialist from the UK's government pension people. The processes are there in theory, but in practice do not work. Once again, on the following please correct me if I am mistaken. My main reason for attempting to transfer the funds over from the UK to the US were two fold. Firstly, the very favorable pound to dollar exchange rate. Secondly was the fact that the US transfers 100% of the fund to my wife in the event of my death, where the UK takes a large percentage. Reluctantly I will have to leave my three funds, and my wifes two funds in the UK and start a new fund in the US. Any advice on the best US funds, type or performance?

im9907620

Hi Ray,
If you die before taking your pension in the UK, then your whole fund is usually available to your wife to either take the lump sum or buy herself a pension. Not sure whether you are getting a little mixed up (or me!) but only if you died after having bought a pension with your fund would your pension diminish - for example, if you bought a pension with only 50% or 75% spouse benefits after first death. Depending on fund size - usually a minimum of £50,000 but this figures varies with opinion - you can switch into a self invested plan which gives you access to a whole universe of funds (UK and Offshore US) and the ability to convert fund into dollars (no need to transfer it then!). Of course, by all means look to start a US one. If your employer does not have one, then you can fund an IRA or Roth IRA (based on earnings). The latter are tax free in payment. Generally, you are not advised to take income from these until you are aged 59.5 or you can suffer penalties. If you want to discuss further, this thread might not be appropriate/impersonal, but feel free to e-mail me